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Trawler Carolina Lady, Inc. v. Ross

United States District Court, E.D. North Carolina, Eastern Division

July 16, 2019

TRAWLER CAROLINA LADY, INC., a North Carolina Corporation Plaintiff,
WILBUR ROSS, Secretary of Commerce; CHRIS OLIVER, National Oceanic and Atmospheric Administration Assistant Administrator for Fisheries; MICHAEL PENTONY, National Marine Fisheries Service Regional Administrator, Greater Atlantic Regional Fisheries Office; DAVID GOUVEIA, National Marine Fisheries Service Assistant Regional Administrator for Analysis and Program Support, Greater Atlantic Fisheries Office, Defendants.



         This matter, raising issues concerning federal management of scallop fishing, is before the court on defendants' motion for summary judgment (DE 49), plaintiff's motion for preliminary injunction (DE 1), plaintiff's motion to strike correspondence beyond the scope of the administrative record (DE 55), and defendants' motion to seal (DE 43). Also before the court is defendants' motion seeking immediate clarification as to whether or not the court will allow evidence to be presented July 19, 2019 (DE 62). For the following reasons, defendants' motions for summary judgment and to seal are granted, plaintiff's motion for preliminary injunction is denied, and the motions to strike and for clarification are denied as moot.


         Plaintiff commenced this action January 31, 2019, against defendants Wilbur Ross, Secretary of Commerce, and subordinate government agency officials in the National Marine Fisheries Service (“NMFS”) (collectively, hereinafter, “defendants”), seeking judicial review of two separate administrative decisions denying successive applications for scallop fishing permit replacements by plaintiff for the 2018/2019 fishing season, ending March 31, 2019. In its first claim for relief, plaintiff asserts defendants violated the Administrative Procedure Act (“APA”), 5 U.S.C. § 704, by wrongfully denying plaintiff's applications to transfer a scallop fishing permit from one vessel, the F/V CAPT. JEFF, to another vessel, the F/V MISS TYLER (1), and then to another vessel, F/V MISS TYLER (2).[1] In its second claim for relief, for mandamus under 28 U.S.C. § 1361, plaintiff seeks to compel defendants to approve its applications.

         Plaintiff also requests through the vehicle of Rule 65 of the Federal Rules of Civil Procedure an injunction requiring defendants to allow plaintiff to fish its allocated 2018/2019 “Days at Sea, ” its nearly ten days carried over from the previous scallop season, and its six allocated access trips, “during the 2019/2020 Atlantic Sea Scallop season should it be unable to fish those allocated days and trips during the 2018/2019 Atlantic Sea Scallop season.” (Compl. p. 18). After this suit was filed, defendants reconsidered denial of plaintiff's second application, and determined to issue the requested permit for F/V MISS TYLER (2). Defendants filed notice of issuance of permit on February 28, 2019, applying to both the “2018 Fishing Year, ” expiring March 31, 2019, and the “2019 Fishing Year, ” expiring March 31, 2020. (DE 15-2 at 1-2).[2] On March 12, 2019, the court entered the following show cause order:

TEXT ORDER regarding 1 MOTION for Preliminary Injunction. In response to preliminary injunction motion, defendants state that they have provided the preliminary relief requested rendering the motion moot. Defendants have filed documentation thereof and notice of issuance of permits. Plaintiff filed no reply in further support of its motion. Upon review of the motion, memorandum in support, response in opposition, and the record in this matter, unless good cause is shown within seven days hereof why the motion for preliminary injunction should not be denied as moot, without more the clerk of court is directed then to terminate that motion.

         Plaintiff responded March 19, 2019, arguing that the case is not moot and the court still has authority to order preliminary injunctive relief in the form of extension of the 2018 fishing season.

         The court entered case management order, setting deadlines for filing of the administrative record and dispositive motions, while maintaining setting for bench trial on July 19, 2019. Defendants filed administrative record on April 29, 2019, with two supplements thereafter.[3] The court granted defendants' motion to limit review to the administrative record and for protective order on May 23, 2019.

         In furtherance of the instant motion for summary judgment, defendants rely upon a statement of material facts that cites to documents in the administrative record. Plaintiff's opposition thereto rests upon an opposing statement of facts, and sworn testimony of plaintiff's counsel and Jonathan Brent Fulcher, plaintiff's president and sole shareholder. Additionally, plaintiff moves to strike two documents in the administrative record: 1) a February 2019 memorandum by defendant David Gouveia (“Gouveia”), Assistant Regional Administrator, NMFS, and 2) an April 2019 letter by defendant Michael Pentony (“Pentony”), Regional Administrator, NMFS.


         To assist with presentation of the facts and claims in this case, the court sets forth below for background purposes a summary of statutes and regulations bearing upon scallop fishing and permitting.

         “Pursuant to the Magnuson Fishery Conservation and Management Act of 1976, 16 U.S.C. §§ 1801-1882, [the “Act”] Congress has delegated to the Commerce Department [and its delegate officials, defendants here] broad authority to manage and conserve coastal fisheries.” Kramer v. Mosbacher, 878 F.2d 134, 135 (4th Cir. 1989). “The Act creates independent bodies, Regional Fishery Management Councils, which help the Department carry out specific management and conservation duties.” Id. A “Council's principal task is to prepare fishery management plans for its area, which must ‘assess and specify the present and probable future condition of, and the maximum sustainable yield' of a fishery.” Id. (quoting 16 U.S.C. §§ 1852, 1853). “Council plans are adopted or rejected by the Secretary.” Id. (citing 16 U.S.C. § 1854). “If adopted, a plan is put into effect by regulations issued by the Secretary.” Id. (citing16 U.S.C. § 1855).

         Under the Act, a fishery management plan must contain provisions “necessary and appropriate for the conservation and management of the fishery, to prevent overfishing and rebuild overfished stocks, and to protect, restore, and promote the long-term health and stability of the fishery.” 16 U.S.C. § 1853(a)(1)(A). A fishery management plan must also “establish a mechanism for specifying annual catch limits in the plan . . ., implementing regulations, or annual specifications, at a level such that overfishing does not occur in the fishery, including measures to ensure accountability.” 16 U.S.C. § 1853(a)(15).

         Under the Act, “[a]ny fishery management plan which is prepared by any Council, or by the Secretary, with respect to any fishery, may . . . require a permit to be obtained from, and fees to be paid to, the Secretary, with respect to . . . any fishing vessel of the United States fishing, or wishing to fish, in the exclusive economic zone . . . [or] the operator of any such vessel. 16 U.S.C. § 1853(b). A fishery management plan may also:

establish a limited access system for the fishery in order to achieve optimum yield if, in developing such system, the Council and the Secretary take into account-
(A) present participation in the fishery;
(B) historical fishing practices in, and dependence on, the fishery;
(C) the economics of the fishery;
(D) the capability of fishing vessels used in the fishery to engage in other fisheries;
(E) the cultural and social framework relevant to the fishery and any affected fishing communities;
(F) the fair and equitable distribution of access privileges in the fishery; and
(G) any other relevant considerations.

16 U.S.C. § 1853(b)(6) (emphasis added). In turn, “[t]he term ‘limited access system' means a system that limits participation in a fishery to those satisfying certain eligibility criteria or requirements contained in a fishery management plan or associated regulation.” 16 U.S.C. § 1802(27) (emphasis added).

         This case concerns scallop fishing under a fishery management plan, the Atlantic Sea Scallop Fishery Management Plan, developed by the New England Fishery Management Council in consultation with the Mid-Atlantic Fishery Management Council. “The Atlantic Sea Scallop Fishery Management Plan was created in 1982, and since has been amended several times, ” with amendments implemented through regulations published by the NMFS. Conservation Law Found. v. Evans, 360 F.3d 21, 24 n. 2 (1st Cir. 2004); see 58 Fed. Reg. 46606-01, 46607 (Proposed Rule, Preamble, Sept. 2, 1993).

         In 1994, in accordance with the Act and Amendment 4 of the Atlantic Sea Scallop Fishery Management Plan, NMFS memorialized in regulations a “limited access” system, which has continued to be refined through regulations to date, including the following features: (1) requirements for carrying a “limited access scallop permit” on any vessel fishing more than a set amount of scallops per trip; (2) “[a] moratorium on most new entrants into the scallop fishery”; (3) “allocations of days-at-sea (DAS)[4] that vessels may fish for scallops” using a limited access scallop permit; (4) “a prohibition on acquiring more than a 5 percent ownership interest in the total number of limited access scallop vessels”; (5) provisions for “eligibility, ” “change in ownership, ” “replacement vessels, ” and a “consolidation restriction.” See 59 Fed. Reg. 2757-01, 2758, 2764 (Final Rule, Jan. 19, 1994) (emphasis added).

         The stated rationale behind these measures included considerations that “fishing mortality (i.e. fishing effort) be controlled by placing limits on the number of days that vessels can spend at sea fishing for scallops. Thus the number of vessels that will be allocated DAS must also be controlled to ensure that the DAS limits are not exceeded.” 58 Fed. Reg. 46606-01, 46607 (Proposed Rule, Preamble, Sept. 2, 1993).

         The court will set forth in further detail below analysis of current regulations pertaining to these limited access system features, as pertinent here.


         The undisputed facts may be summarized as follows. Plaintiff is a North Carolina corporation that owns the fishing vessel F/V CAPT JEFF (official No. 906996). (AR 3390 (DE 37-4 at 9)). On November 20, 2016, the F/V CAPT JEFF struck a rock or rocks in Buzzards Bay, Massachusetts, and nearly sank. (AR 3848 (DE 41-34)). It suffered significant damage, and plaintiff's safety consultant at the time estimated that repairs would take four to six months. (Id.)

         From March 2017 to November 2017, a different vessel owned by plaintiff, the F/V MISS TYLER (1), [5] fished for scallops for all the days at sea (DAS) allowed under its scallop fishing permit, which permit is identified as No. 320857, and DAS allocation is identified as MRI 4797.[6](AR 3325 (DE 36-30 at 2)).

         In late 2017, plaintiff sold the F/V MISS TYLER (1), “with the seller retaining the permits” to BHG Scallop LLC, which used the F/V MISS TYLER (1) to fish under a different “DAS (MRI 4441)” designation, from January 2018 to May 2018. (Id.; see also AR 3358 (DE 36-38 at 5)). Also in late 2017, plaintiff transferred F/V MISS TYLER (1)'s “permit and DAS (MRI 4797)” to the F/V CAPT JEFF. (Id.). Plaintiff's president and sole shareholder, Jonathan Brent Fulcher, has the same last name as Gregory Fulcher, [7] one of two members of BHG Scallop, LLC. (AR 3326 (DE 36-30 at 3); Pl's Resp. to Stmt. of Facts ¶ 7).

         At some point prior to June 12, 2018, plaintiff acquired back from BHG Scallop, LLC, the vessel F/V MISS TYLER (1). (See AR 3358 (DE 36-38 at 5)). On June 12, 2018, plaintiff submitted to NMFS an “application for a vessel permit transfer” from F/V CAPT JEFF to F/V MISS TYLER (1). (AR 3382, 3389-3391 (DE 37-4)) (hereinafter, the “June 2018 application”). Plaintiff represented in its June 12, 2018, application that it was the owner of the vessel F/V MISS TYLER (1) and the F/V CAPT JEFF. (Id.).

         Defendant Gouveia, on behalf of NMFS, sent plaintiff a letter on July 16, 2018, denying plaintiff's June 2018 application (hereinafter, the “July 2018 decision”) stating as follows:

I am responding to your June 12. 20] 8, replacement application of the F/V Capt Jeff with the F/V Miss Types. Federal regulations specify that a limited access scallop vessel owner may rot, "Combine, transfer, or consolidate DAS [days-at-sea] allocations, except as allowed for one-for-one Access Area trip exchanges," Because the F/V Capt Jeff has already fished one DAS allocation this year, and based on the information provided, it appears that granting this replacement application would violate this regulation.

         When reviewing applications of this nature, we consider the following criteria;

1) The buyer or seller may not derive any financial benefits from the operation of the vessel after it is transferred;
2) the seller may not exercise any control over the activities or operation of the vessel after it is transferred;
3) there are no common shareholders, partners, or investors with significant overlapping ownership interests in the seller or buyer's business operations; and
4) the sale of the vessel is an arm's length transaction and one that meets fair market value,
Based on our review of this application, the relationship between Jonathan Brent Fulcher and Gregory Fulcher, the lack of consideration for the replacement and other factors, we have concluded that this application is not based on an arm length's transaction and would result in the consolidation of DAS from two vessels on to one vessel intended to mutually benefit both parties involved. Therefore, we cannot authorized this replacement.

(AR 3323 (DE 36-29)).

         On July 17, 2018, plaintiff responded to defendant Gouveia, asking for the “section of the Code of Federal Regulations where each of the four listed criteria may be found, ” and asking for identification of “all documents or evidence relied upon” to reach the decision denying the application. (AR 3406 (DE 37-7 at 2)).

         On August 3, 2018, Defendant Gouveia, on behalf of NMFS, responded by letter providing a citation to a section of the Code of Federal Regulations, 50 C.F.R. 648.14(i)(2)(iv)(B), and additional explanation of the factual basis for its July 2018 decision. After reviewing the history of ownership and DAS use of F/V CAPT JEFF and F/V MISS TYLER (1), defendant Gouveia explained: “In June 2018, we received the current replacement application, that is requesting to place a second scallop DAS permit on the F/V MISS TYLER this year, reverse the original ownership of the vessel back to [plaintiff] and to transfer back F/V MISS TYLER's original permit and DAS (MRI 4797).” (AR 3325-3326 (DE 36-30 at 2-3)). “This request for vessel replacement is the same transaction in reverse as last year's by the same owners using the same vessels and permits[, ] and requesting the combination of the same DAS on the same vessel for a second year in a row.” (AR 3326 (DE 36-30 at 3)). Defendant Gouveia continued:

This latest chapter in a very convoluted history of numerous replacements of the same vessels and transferring of DAS permits onto these vessels more than once brings into focus, for the first time, an apparent and deliberate pre-arranged agreement between the Fulcher brothers to consolidate DAS from two vessels onto one vessel in the same fishing years for their mutual benefit. Based on this historical pattern of maneuvering of permits and DAS over the last three fishing years, the familial relationship of the principal owners of the vessels involved, the apparent lack of full consideration for these transactions, it appears that these two companies are working together to share this vessel for their mutual financial benefit. Thus, it appears that the requested transactions involving these ...

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